Buildings insurance
Cover for physical damage to a building from risks such as fire, storm and water.
Definition
Buildings insurance covers physical damage to immovable property and its fixtures from insured perils such as fire, storm, water and vandalism. In the Netherlands it is arranged on a reinstatement-value basis. Property owners, landlords and mortgage lenders rely on it, and commercial leases commonly specify which party must arrange and pay for buildings cover as opposed to contents cover.
Example
After a storm tears off part of a warehouse roof, the buildings insurer pays the reinstatement cost of the structure.
Why this is a business risk
Under-insurance is a material risk: if the insured sum is set below the actual reinstatement value, the insurer applies a proportional reduction to every claim. Businesses that occupy premises under a commercial lease need to understand precisely which party the contract places the insurance obligation on, as a gap in cover between landlord and tenant can leave both parties exposed after a fire or flood. Accumulated improvements and fit-out works by tenants are frequently not covered by a landlord's policy unless expressly stated.
How to manage it
- Obtain a professional reinstatement-value survey periodically, particularly after major works or rising construction costs, to avoid under-insurance.
- Read your commercial lease carefully to confirm which party is obligated to arrange buildings cover and what the minimum policy terms must be.
- As a tenant, check whether improvements and fit-out works you have made are covered by the landlord's policy or whether you need separate tenant's improvements insurance.
- Ensure that a mortgage lender's interest is noted on the policy, as most commercial mortgages require this as a condition of the facility.
Legal references
Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.
Frequently asked questions
Common questions about this term.